After 19 years in which Batmanghelidjh has taken Kids Company from a drop-in centre in Peckham, south London, to David Cameron’s go-to charity for tackling gangs – so trusted it has received £30m of public money since 2008 – the announcement of a police investigation marked an unexpected nadir.

David Cameron, with Kids Company founder, Camila Batmanghelidjh, and Labour’s Frank Field.

It came after weeks in which the charity has been buffeted by questions over its financial accountability, forced to see Batmanghelidjh stand aside as chief executive by the Cabinet Office in return for a further £3m, and watched former employees go to the media with stories of the chaos of its operations and its handling of money.

“It’s knocked us for six,” said one member of staff. “We had just got back on our feet. We agreed to restructure the charity. The government had agreed to give us £3m.”

Workers at the charity sounded strained and troubled at the downturn in the fortunes of the organisation, particularly at the nature of the allegations that police are investigating.

They include claims that criminal behaviour went unchecked on the premises, including sexual abuse, drug abuse, physical assaults and the dissemination of indecent images, involving, in some cases, the charity’s employees.

Kids Company says they were totally unaware of the allegations – which span a period between 2008 and 2012 – until they were contacted by the Metropolitan police on Thursday, and later by the BBC requesting an interview.

In a letter to the BBC, lawyers for Kids Company accused the corporation of “grossly irresponsible” journalism. It reads: “We are seriously concerned that the BBC’s approach seems designed to trigger a police investigation that it is then able to announce, and in the process damn our client.”

For the police, the claims are of a serious enough nature to warrant the mounting of a criminal investigation run by specialist detectives from the sexual offences, exploitation and child abuse command.

While they are being treated seriously, it is understood the allegations do not involve claims of organised child sexual abuse on a large scale. It is understood a handful of individuals contacted the NSPCC’s helpline on Friday to pass on information relating to the case.

Police sources said Kids Company was cooperating fully with its officers, providing files and documents relating to the period of time being investigated. Detectives have yet to interview the two former members of staff who made the allegations to the BBC.

The two staff members have worked for the charity for a number of years, but made no allegations of criminality while they were there, either to the police or to managers, it is understood.

Batmanghelidjh said on Friday that in 19 years the charity had not been found to have fallen short in its duty to protect children. She said: “If we had been aware of sexual assaults taking place on our premises we would have reported these to the police and the local safeguarding board. So you can understand I am taken aback by allegations that now present themselves, about which I knew nothing.

“If these allegations are true, I am filled with horror at the thought
that someone may have been harmed in our care and we were not aware of it.”

As the police inquiry continues, concerns over the charity’s financial accountability, including how it spends its vast amounts of public money, are also being examined. Previous employees have spoken of how young people are handed envelopes of money each week to spend as they like, something Batmanghelidjh has defended as vital support to the most vulnerable who do not get benefits, but others query.

It was the financial accountability of Kids Company that concerned the Cabinet Office when it withheld £3m of further funding for the charity last month, only agreeing to release it if Batmanghelidjh stood down and restructuring was put in place.

The Charity Commission, which is now engaged in discussion with Kids Company over its funding and governance, pending a potential investigation, said on Friday: “In recent weeks, additional potentially serious concerns were raised with us about the charity’s financial management and governance by ex-employees of Kids Company. We have been in contact with the trustees in relation to these concerns, including meeting charity representatives. The charity has been responsible in its engagement with us. We are aware of the current police investigation. We cannot comment further at this time.”

Senior figures at Kids Company are worried about the effect that the drip-drip of negative stories in recent months has had on the stretched finances of a charity that has traditionally been able to rely on huge donor loyalty.

As the story broke, senior staff initially feared the worst, wondering if it would wreck attempts to get the charity back on track and even make the charity unviable. “This morning, we felt that it was all over,” one executive told the Guardian.

They say it is impossible to predict how the media coverage – which they see as disproportionate – will affect the charity in the longer term. Ultimately, the concern is it may trigger a loss in donor confidence, with devastating consequences – the closing off of support for some of Britain’s most damaged and maltreated children.

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